ikkyu2 (99.36)

AAPL valuation

10

Apple reported $44 in earnings over the last 4 quarters. The current stock price is $400 and they have $140 billion in cash on hand. They pay approximately a 1% dividend, maybe a hair more, maybe as much as 1.5% dividend yield at this depressed price, but let's just say 1%.

Therefore TTM P/E is 6; for a back of the envelope calculation, I like to subtract a point from that for every % of dividend yield, in terms of comparison to other stocks that don't pay dividends, and prior periods when the dividend yield was 0% or different.

It is not often that you get to buy AAPL in the 4.5-5 adjusted P/E range. The market is either saying that AAPL is a huge value trap or non-rational methods of valuation are being used by market participants. I believe the latter.

Er, to be clear, that 6 is a cash-adjusted TTM P/E figure. Peter Lynch's books taught me to 'back out the cash'; after all, as an owner of the company, you are essentially buying part of that cash pile when you buy a share of stock with dollars.

I like Apple at these levels and have started buying. With volatile markets like these buying in batches is key and that is what I have started with APPL specifically. Overall I wouldn't really touch the market right now, but Apple is sort of a special situation given the last several months of negativity surrounding it.

Interesting valuation technique (especially the subtracting dividend yield % from P/E part). CATO is trading at a 2.5 P/E after you back out the cash, subtract a point for every % of dividend yield. :)

What about stocks that lean toward buybacks over dividends (BBBY, CTSH, XOM, ROST)? Do you have an alternate method for those?

Where are you getting your numbers from ? are you just guessing ? from the current expected same dividend the dividend rate from apple is over 2.5%

But... according to analysts that only covers US generated income...

Apple announced its first dividend last March, and many investors have been hoping for more cash to be returned to shareholders. Sacconaghi noted that last year's announcement covered most of the company's U.S.-generated cash, so the company faces more complexities if it plans to "materially" increase its cash return this year.

So if Apple considers increasing returning cash to its sharehoders they will have to get that money back to the states ?

If that money even exists ? I have a sneaking suspicion that Apple has had cooked its books and has been hiding its real results and numbers.

Regardess I see its stock going down, otherwise why would the company not use its money to buy the stock back at what you consider to be really cheap prices ?

I like owning stocks in things I buy and use. I love the Iphone. I keep adding happily. I still think AAPL should buy out XRX for that chiplet technology alone. They could even overpay at $25 a share and it would make only a little dent in their cash.

As far as buybacks go, I don't have a great way to plug that into my quick and dirty valuation method (which I only use for companies with no debt, by the way.) Sometimes - not always - you can get figures on how much stock was bought back TTM, but I have found it is much more difficult to predict how much stock will be bought back in future periods.

As far as whether AAPL should do buybacks and whether it will or ought to repatriate its foreign cash holdings: I think buybacks would be a great use of cash at this price level, better for most shareholders than dividends. I feel like AAPL ought not to repatriate foreign cash holdings while doing so incurs a 30%+ tax hit, but I don't have a strong opinion other than that.

Just bought 3 more after hours at $390.50. It is quite possible I will have my 100 shares sooner than I thought and without a split. Kind of reminds me of the '08-'09 crash days but this time I have dry powder to act with.

According to the bean counters and I use that term loosely given the recent KPMG accounting scandal as well as the arthur anderson debacle involving Enron.

Apple has Cash per share (MRQ)42.41

roughly only 42 dollars cash per share or roughly 10% of the current trading price is attributable to the share price... they have roughly 939.1 million shares ~ doing the math ~ means the company has roughly 39,442.2 million in cash ?

wait is that right ? thats only 3.9 billion >>> ??? why do I keep hearing that they have 140 billion in cash ????

something doesn't sound or smell right in bean town... so are you telling me that 133 billion either doesn't exist ? can't be accounted for ? or is just a strange lie ?

Well I suppose I have the right being the owner of 13 shares of AAPL to knock on HQs doors and insist on seeing their books, but somehow I don't see that happening. Maybe on a conference call after earnings is out April 23 one of the analysts can ask.

I did look at Value Line and it shows about 40 billion cash. So let's use that number. Back it out puts stock at 350 divide that by $44 projected full year earnings and you are looking at an 8 PE with a 2.7% current dividend yield. Find the other 100 billion and you are looking at even sweeter numbers I suppose.

What can I say Lordz, I love the products. I love the valuation, this company is not going BK anytime soon especially with zero debt. I will continue to buy at these levels or lower.

Did that with XRX and bled red for awhile but my DD is paying off and I am solidly in the green as long as it stays over 7. And should it fall under, I will buy more.

April 23 is going to be an interesting day for me since both release earnings then.

I like you awall can only find just under 40 billion in cash... on any financial statement... come on we are talking about 100 billion dollars ???

In what banks in what fairly liquid investments is this in ???

greek bonds ? in cyprus banks ? gold coins ? okay lets say that the 100 billion is in outside banks outside of the USA so as to not incur them any US federal taxation as they state on their financial statements that they intend to perpetually invest and keep that money outside of the USA ~ that means that shareholders can never get at these assets ?

So IMHO Apple might as well as bought a really huge pile of cocaine from columbian drug lords ~ because shareholders imho will forever be kept away from this ? so what good is that ? so I jokingly say that apple might as well as blown that money to send thousands of people to the emergency rooms with cardiac issues from racing hearts and dilated pupils.

Because apple shareholders will forever be kept away from what is a lot of loot...

Thanks EIC... but if I'm reading that correctly it says they have 7 bill in cash

3.6 bill in mutual funds

3.6 bill in money market funds

22.8 bill in US treasury securities

20.6bill in us agency securities

4.6 in non us securities

2.3 in cert deposits

2 in commercial paper

49.3 in corp securities

6 in municipal securities

13.6 in mortgage backed and asset backed securities

on paper its roughly 121.8 billion of which only 7 billlion is directly in cash the difference can be more or less or worthless depending on financial conditions and what they are invested in...

honestly unless apple does a whole lot of selling according to said 10-k they only have 16 billion in cash and cash equilavents.. the remainder is 23 bill in short term securities and 97 bill in long term securities...

Basically they only have enough to cover expected dividends and cover us operational expenses and some stock buy backing...

As I said in one of comments, I purchased 30 AAPL at $423 with the intention of keeping for a long time. However, I sold it when was $431 because price war from samsung. Here are the reasons.

Since the introduction of S4, there was a splash sale of S3 at amazon and walmart for 9.99 two years contract. Amazon and walmart sold out all S3 and out of stock in 2 days. Even though apple has got lot of products, one of the main bread winner is iphone which is routed by SamSung. In addition, Samsung reduced S4 from $250 to $199.

These are the two sales giants (amazon,walmart) and we do not know how many million users, like me, switched from Apple iphone to S3. Those millions of users lost are permanent loss for at least two years. It is not like NFLX that customers can jump over fence next day.

The impact will not be known in 4/23 results, but will reflect in future AAPL results. Being the market is looking downward for next one month like bearish hit, some institutional investors started dumping AAPL. If 4/23 results are not meeting the expected, it will go drastically. If results are fine, it will still go down, but slowly. In addition, Tim will have pressure to produce results.

Even though I am new to stocks, I am not a big guy like TIM COOK or Insitutional investors. Rather than focusing how apple can recover or how it can perform, I focus on how to gain given the situation. We can not change the big guys in apple, but we can change our path.

Hindsight, I am happy that my intuition to sell AAPL is correct. This is the first time I purchased AAPL. I would have easily lost $1200 over 10 days.

Now, frankly, I am scared with stock market, moved to tax-free bonds at least next two months.

I found your previous post most informative as to the expected downward direction apple still likely will follow.

The worst thing one could do is to ride a stock down ~ instead you changed your opinion as you saw the stock change.

Most people can't or won't do that... speaking of smaller investors... I'm sure theres some little investors out there who bought in for the long term around 700 or 600 or even 500 who are in a world of hurt thinking they got in at a good price...

I can see apple going the way of the walk-man... the vcr... the 8 track... or being like microsofty if they are so lucky... back during the 1999 internet crash when they were basing stock prices upon clicks, hits, and other bogus non income producing things that produced nothing to sustainability or profit... microsoft was around 100 a share I've been told... imagine if you had bought some than or say yahoo when it was trading really high...

many people had been wiped out so badly they had no stomach or money to be in the markets for the 2007-2008 world crash...

Lordz are you short the stock? Because you are sounding more like a Yahoo poster. AAPL has at worse a PE of 8. Let me repeat, a PE of 8 (I am discounting the $100 billion you think doesn't exist). Stop making it sound like its PE is 100.

Jiltin admits to being new at stocks. I gave him good advice. Cost average in. If you bought a stock with the intentions to hold it for a long time then short term drops are opportunities to take advantage of.

That is exactly what I did with XRX as it dropped to low $6 and I will do with AAPL should it continue to drop because I am confident it will see $600+ in the future and it yields more than what any bank account would pay me.

But if Jiltin can't handle the daily swings then muni bonds are the place for him. Or he might want to look at MLPS, BDCS (which will outperform the large banks) and REITS.

I am sorry, as did Alstry over the years we fought until he capitulated and left, you are giving people bad advice.

I keep thinking "wow aapl seems so cheap, I really should buy". Then I had a convo with a friend today who reminded me of nokia....had awesome market share, was doing great, then had some negative growth for a quarter and bam the stock got cut 80%, same with BBRY.....it happens with tech stocks all the time. Margins and market share all that matter....it seems hard to imagine but what if it gets dominated by goog and samsung? Idk....I think it could fall further, the chart is gross....maybe I would buy some at $300

I am just as surprised that AAPL has breached below $400 as everyone else. If AAPL misses on earnings or revenue, this stock could easily tumble to down to $350, which may be the flush that the stock needs to begin an upward trend. Be careful out there!

You are perfectly right on this "But if Jiltin can't handle the daily swings then muni bonds are the place for him. Or he might want to look at MLPS, BDCS (which will outperform the large banks) and REITS."

After selling AAPL, I am unable to withstand the daily price fluctuations. Hence, I moved main portfolio to taxfree NCA,NCO,NQC, NVC. I am not so much disturbed now.

For my learning purpose, I play with stock with less amount. I need at least another six months to learn the risk/issues.

But, I just want to inform you that Tim is not doing right. Big Buyback without future growth will hurt him rather than help him. Instead of identifying and resolving issues, he is making it complex. If top management is not thinking right direction, it is not good for the company.